Postal Service gets OK for temporary rate increases

Dec. 24, 2013 - 06:00AM
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The price of a first-class stamp will temporarily jump to 49 cents next month as the U.S. Postal Service won approval Tuesday for a package of emergency rate hikes, but failed to convince regulators to make the increases permanent.

In voting 2-1 in favor of the temporary hikes, the Postal Regulatory Commission ruled that the Postal Service had made a case to recoup $2.8 billion worth of mail volume lost between 2008 and 20011 because of the “Great Recession,” but judged that the increases should last “just long enough to recover the loss,” Ruth Goldway, the commission’s chairman, said in a news release.

In the ruling released Tuesday, the PRC told postal officials to report every three months on how much money the increases are generating and to come up with a plan by May for phasing them out once the recession-related losses have been made up. That point should be reached in less than two years, according to the ruling.

The Postal Service is “disappointed” at the commission’s decision to limit the length of the increases, spokesman Roy Betts said in an emailed statement, adding that the agency will have more to say after reviewing the approximately 200-page decision.

The price of a first-class stamp, currently 46 cents, was already set to rise to 47 cents in late January; Tuesday’s decision will push the price of the Postal Service’s most profitable product to 49 cents as of Jan. 26. The cost of a range of other postal products, including postcards, international letters and standard mail, will also rise.

While a 2006 law generally caps postal price increases at no more than the inflation rate, the Postal Service can seek larger “exigent” hikes based on extraordinary circumstances. In its request filed in late September, USPS officials claimed that continuing multi-billion dollar losses and a slim cash-flow margin met that threshold.

Three years ago, the commission had unanimously rejected a similar request in the face of fierce resistance from the mailing industry. While the industry was also opposed to this year’s requested rate increases, the majority in Tuesday’s split commission decision concluded that the Postal Service’s “dangerously low liquidity levels make the rate adjustments necessary to maintain and continue needed service.” But leaving higher prices in effect indefinitely would result in “over recovery” of recession-related losses, the ruling said.

The temporary nature of the boosts was no consolation to a coalition of mailing industry groups, which labeled the decision “an unmitigated disaster.”

“The fact that this is a ‘surcharge’ does nothing to help our industry, which will have to start paying next month,” Jim Cregan, a magazine trade group representative speaking on behalf of the coalition, said in a statement. “We are reviewing our next steps.”

Under the same 2006 statute, both the Postal Service and the industry may appeal the commission’s decision to the U.S. Court of Appeals for the District of Columbia.

Voting in the majority were Goldway and Commissioner Mark Acton. Opposed was the PRC’s vice-chairman, Robert Taub, who questioned the basis for making the increases temporary.

“I am concerned that this formula is being imposed without the full benefit of broad public input and an opportunity to fully assess potential unintended consequences on both the Postal Service and mailers,” Taub wrote in a dissenting opinion.